Supplying Slot Machines to the Poor

Abstract

As gambling becomes increasingly accessible both in the U.S. and worldwide, governments face an important policy question: how should they exploit the industry’s growth to raise tax revenues while protecting individuals from the detrimental effects of gambling? Using data on slot machines from the largest per-capita gambling market in the world, Australia, we estimate a structural oligopoly model to: (1) quantify firms’ incentives to make gambling accessible among socio-economically disadvantaged groups; and (2) evaluate the effect of government policy (gambling taxes, supply caps and venue smoking bans) on the distribution of slot machine supply, tax revenue and problem gambling prevalence. Classification-H71, L13, L83, L88, I31